A contract of affreightment is a long term contract, where the cargo and not the vessel is central to the contract. As the cargo quantity is large, a ship owner contracts with the cargo owner to carry a negotiated quantity of cargo regularly between named ports, on agreed voyage chartering terms, over several voyages, using several vessels. These vessels could be his own or, could be chartered in specially for the contract.
The advantage of such a contract is that a ship owner obtains security of employment for his vessel(s) for the duration of the contract. COA contracts could be tailor-made to suit cargo and/or route, voyage contracts could be amended to suit the cargo to be carried, or a standard COA document that incorporates a voyage charter party for vessel performance could be used.
COAs are normally negotiated for long periods of time, for e.g. for two to three years, and therefore are particularly useful when a ship owner wants a regular, stable income. Cargoes carried are commodities in great demand. Some examples of common COA cargoes are iron ore and Liquefied Natural Gas (LNG).
- Also called Tonnage contract and is used when the shipper needs to transport large quantities over a long period.
- The contract does not mean particular ships and the ship owner is free to use any suitable ship, his own or chartered for each shipment.
- Loading dates are specified and punctual performance is very necessary.
- Each individual Shipment is normally subject, to the terms of a conventional charter party.
As the name signifies, this is basically a contract/agreement, between a “charterer” and a “ship owner”, “disponent owner” (a person/company, which displaces or takes the place of the legal owner. The “head-Charterer” can be referred to as the “disponent owner”), or, “carrier, for the transportation of a large-quantity of specified-goods (between particular areas) for satisfying a “long-term” need for transport, usually for coal and iron-ore, in bulk. The type and size of the ships, is identified by the charterer, though which are nominated by the ship owners. In other words, the ship owner agrees to transport a pre-agreed volume of cargo during a specified period, on the basis of the charterers nominating cargoes and loading-dates, besides as already stated, the owners nominating suitable ships.
The shipment dates may not be as precise, often giving an even-distribution of shipments over a period, say 12 months. A pre-specified “minimum quantity” must usually be loaded on the ship for each voyage, with a “more or less” margin at the option of either the charterers (i.e. more or less at charterer’s option, i.e. MOLCO) or the owners (i.e. more or less at owner’s option, i.e. MOLOO).
The agreement may be based on a “standard charter party” as the main document, with the addition of a number of rider clauses. The agreement may also be drawn on a main Contract of Affreightment document, such as the “ Baltic and International Maritime Council Standard Volume Contract of Affreightment for the Transportation of Bulk Dry Cargoes Code Name: “VOLCOA”. This however, may be supplemented by separate “voyage charter parties” as related to each voyage made under the Contract of Affreightment. Interestingly, the Contract of Affreightment may be used by a ship operator, who has no fleet of his own and who charters ships “in” for each voyage.
Contract of Affreightment
A contract of affreightment is a long term contract, where the cargo and not the vessel is central to the contract. As the cargo quantity is large, a ship owner contracts with the cargo owner to carry a negotiated quantity of cargo regularly between named ports, on agreed voyage chartering terms, over several voyages, using several vessels. These vessels could be his own or, could be chartered in specially for the contract.
The advantage of such a contract is that a ship owner obtains security of employment for his vessel(s) for the duration of the contract. COA contracts could be tailor-made to suit cargo and/or route, voyage contracts could be amended to suit the cargo to be carried, or a standard COA document that incorporates a voyage charter party for vessel performance could be used.
COAs are normally negotiated for long periods of time, for e.g. for two to three years, and therefore are particularly useful when a ship owner wants a regular, stable income. Cargoes carried are commodities in great demand. Some examples of common COA cargoes are iron ore and Liquefied Natural Gas (LNG).
- Also called Tonnage contract and is used when the shipper needs to transport large quantities over a long period.
- The contract does not mean particular ships and the ship owner is free to use any suitable ship, his own or chartered for each shipment.
- Loading dates are specified and punctual performance is very necessary.
- Each individual Shipment is normally subject, to the terms of a conventional charter party.
As the name signifies, this is basically a contract/agreement, between a “charterer” and a “ship owner”, “disponent owner” (a person/company, which displaces or takes the place of the legal owner. The “head-Charterer” can be referred to as the “disponent owner”), or, “carrier, for the transportation of a large-quantity of specified-goods (between particular areas) for satisfying a “long-term” need for transport, usually for coal and iron-ore, in bulk. The type and size of the ships, is identified by the charterer, though which are nominated by the ship owners. In other words, the ship owner agrees to transport a pre-agreed volume of cargo during a specified period, on the basis of the charterers nominating cargoes and loading-dates, besides as already stated, the owners nominating suitable ships.
The shipment dates may not be as precise, often giving an even-distribution of shipments over a period, say 12 months. A pre-specified “minimum quantity” must usually be loaded on the ship for each voyage, with a “more or less” margin at the option of either the charterers (i.e. more or less at charterer’s option, i.e. MOLCO) or the owners (i.e. more or less at owner’s option, i.e. MOLOO).
The agreement may be based on a “standard charter party” as the main document, with the addition of a number of rider clauses. The agreement may also be drawn on a main Contract of Affreightment document, such as the “ Baltic and International Maritime Council Standard Volume Contract of Affreightment for the Transportation of Bulk Dry Cargoes Code Name: “VOLCOA”. This however, may be supplemented by separate “voyage charter parties” as related to each voyage made under the Contract of Affreightment. Interestingly, the Contract of Affreightment may be used by a ship operator, who has no fleet of his own and who charters ships “in” for each voyage.
